A fair-minded report at a crucial time

Sep 7th 2005
From The Economist Global Agenda

The commission investigating the United Nations’ oil-for-food scandal has issued a report that highlights the organisation’s structural failures. It comes at a crucial time, a few days before a meeting of world leaders to discuss UN reform

SOME of the United Nations’ critics see the organisation as corrupt through and through. The Wall Street Journal’s editorial page has compared it with a mafia family. Others see it as manipulated by certain member states, whether by the overbearing United States or by cynical France, Russia and China. This week’s report on the scandal surrounding the UN-administered oil-for-food programme in Iraq agrees with some of this criticism, though it paints a more nuanced picture.

“One perspective is that the United Nations Organisation was simply asked to do too much,” writes the commission behind the report, headed by Paul Volcker, a former chairman of America’s Federal Reserve. This laconic statement goes to the heart of the matter. The oil-for-food programme was the biggest financial undertaking in the UN’s history. Iraq, under comprehensive and crippling trade sanctions after its invasion of Kuwait in 1990, was allowed in 1996 to start selling oil to buy food and medicine for its people. The programme began modestly but grew exponentially, eventually encompassing $64 billion in oil sales and $37 billion in purchases for Iraq. As it grew, it simply overwhelmed the UN’s auditing and managerial capacity.

It was this that allowed the headline-grabbing corruption inside and outside the UN. In a previous report, the Volcker commission found that the oil-for-food programme’s head, Benon Sevan—who has since resigned—took kickbacks from the Iraqi regime. The commission has alleged that Kojo Annan, the son of UN secretary-general Kofi Annan, concealed the length and depth of his relationship with an inspection-services company that had won a UN contract. (The secretary-general himself has been accused of lax oversight, but not of personal corruption.)
The UN’s detractors—and in particular American conservatives—have focused on these lurid tales. But the commission writes that “the pervasive administrative difficulties were not only, or even primarily, related to personal malfeasance.” Rather, it was the poorly-thought-through conception and execution of the oil-for-food scheme that made abuse possible.

First, there was no clear line of leadership. The Security Council (permanent members: America, Britain, China, France and Russia) created the programme, in what was a thoroughly political decision. The UN’s Secretariat was charged with its execution, but the Security Council maintained a sanctions committee that reserved the right to block any transactions requested by Iraq. “That turned out to be a recipe for the dilution of Secretariat authority and evasion of personal responsibility at all levels,” says the report, which calls on future programmes to be designed by the Security Council but run by the Secretariat alone.

Once the programme began, the Secretariat fell grievously short in its managerial, personnel and auditing controls. There were simply not nearly enough competent people to oversee such a huge endeavour. A dizzying number of agencies were involved, but there were no clear mechanisms for co-ordinating or tracking their spending under the programme. As an earlier report noted, the programme’s auditors were well-intentioned and hard-working, but far too few in number to do the job properly. This week’s report recommends the creation of an independent auditing board.

As well as highlighting improvements needed within the UN Secretariat, the report criticises the Security Council members who oversaw the programme. Press reports have confused different sources of Iraq’s illicit income during the oil-for-food years. As the report points out, by far the largest single source of ill-gotten gains for Saddam Hussein’s regime—some $8.4 billion—was oil smuggling to its neighbours, primarily Jordan, Turkey and Syria. By contrast, Iraq made just $1.8 billion from the manipulation of oil and import contracts under the UN’s purview. In any case, all Security Council members (not just the permanent five) had a veto on oil-for-food decisions, including contracts.

The smuggling was well known to the Security Council at the time, the report stresses. America may have looked the other way at some of Saddam’s takings on the side because the smuggling took place with several of the superpower’s Middle Eastern allies (and America was anyway preoccupied with keeping arms out of Iraq). Meanwhile, the report notes, Iraq sought to give oil contracts to companies in countries it perceived as sympathetic to lifting sanctions—especially Russia, China and France.

Despite the criticism the report makes of the UN structure, the member states and certain individuals—of which more will be revealed in the Volcker committee’s final report, due in October—it also stresses that oil-for-food largely succeeded in its basic task of easing the suffering of ordinary Iraqis while depriving Saddam of weapons of mass destruction. Nonetheless, the report says, real change must now happen at the UN, which otherwise will “invite failure, further erode public support, and dishonour the ideals upon which the United Nations is built.”

The report is well timed. Next week, national leaders from around the world will meet to discuss UN reform at a key summit in New York. Their remit includes many of the organisational changes that the Volcker committee calls for, especially the strengthening of internal oversight.
But the prospects for the summit are far from sunny. Poor countries are far more interested in new initiatives for development aid, while some richer countries, especially the European ones, would like to see renewed commitment to tackling global warming. America, meanwhile, wants to focus on improving governance in poor countries, not more aid, and remains hostile to the Kyoto protocol on climate change. Compromises are slowly being hammered out in the final days before the meeting. The latest Volcker report may help to focus minds. But much still remains to be done.

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